Intel Corp. v. Terabyte Intern., Inc.

• Decision Date: 27 September 1993
• Docket Number: 92-55424,Nos. 92-55207,s. 92-55207
• Parties: , 28 U.S.P.Q.2d 1182 INTEL CORPORATION, Plaintiff-Appellee, v. TERABYTE INTERNATIONAL, INC., Jean Hsu, Kenneth Hsu, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 614

6 F.3d 614

26 Fed.R.Serv.3d 1201, 28 U.S.P.Q.2d 1182

INTEL CORPORATION, Plaintiff-Appellee, v. TERABYTE INTERNATIONAL, INC., Jean Hsu, Kenneth Hsu Defendants-Appellants.

Nos. 92-55207, 92-55424.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 2, 1993.

Decided Sept. 27, 1993.

Harlan P. Huebner and R. Joseph Trojan, Trojan Law Offices, Los Angeles, CA, for defendants-appellants.

Rebecca A. Lenaburg, Katherine J. Poss and Nora Cregan, McCutchen, Doyle, Brown & Enersen, San Francisco, CA, for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before NOONAN, FERNANDEZ, and KLEINFELD, Circuit Judges.

FERNANDEZ, Circuit Judge:

Terabyte International, Inc., Jean Hsu and Kenneth Hsu (collectively referred to as "Terabyte") appeal the district court's judgment following a bench trial in Intel Corporation's ("Intel") trademark infringement action under the Lanham Act, 15 U.S.C. Secs. 1051-1127 and California state law. Terabyte contends that the district court erred by concluding that it had misappropriated Intel's trademark and that it acted willfully. Terabyte also challenges the district court's award of damages and attorney's fees. We affirm on the merits, but reverse and remand as to the amount of attorney's fees.

STATEMENT OF FACTS

Intel manufactures micro computer components and systems, including devices known as math coprocessors. Intel produces several different math coprocessors that offer varying levels of performance, which affect the speed at which personal computers function. For example, the Intel 287-6 is designed for computers operating at six megahertz, whereas the 287-10 chip has the capacity to run at ten megahertz. "Slower" or low performance math coprocessors are less expensive than "faster" or high performance math coprocessors. Intel distributes its math coprocessors directly to original equipment manufacturers and through authorized retail distributors.

Terabyte is a computer components broker which sells Intel math coprocessors to end users. Terabyte did not purchase math coprocessors directly from Intel; rather it obtained the devices from other brokers and distributors. This action involves the distribution and sale of falsely designated 287-10 and 387-25 Intel math coprocessors.

After receiving complaints from its authorized distributors that math coprocessors were available at prices below cost, Intel launched an investigation. It discovered that slower math coprocessors were being redesignated and sold as faster and more expensive math coprocessors. ¹ Intel tracked some of those "remarked" math coprocessors to Terabyte. Between July, 1990 and January, 1991, Intel, acting as an undercover customer, purchased math coprocessors from Terabyte, the great majority of which were remarked. On some of those math coprocessors, the original Intel markings could be detected beneath the remarkings. Each time Intel bought math coprocessors from Terabyte, the box containing the product was already opened. Based on those purchases, Intel sought and obtained an ex parte seizure order against Terabyte. The order was executed on February 26, 1991. One hundred twenty five math coprocessors were seized; all were remarked.

At trial, Terabyte introduced evidence in an attempt to show that its actions were innocent. Terabyte stated that it had bought math coprocessors from Microstar and had After a three-day bench trial, the district court found Terabyte liable for trademark infringement and awarded $380,663.00 in damages. The district court also found that the infringement was willful and awarded attorney's fees in an amount to be determined at a later time. On June 9, 1992, the district court ordered Terabyte to pay Intel's attorney's fees in the amount of $206,410.25.

attempted to sell those math coprocessors to Telecomputer. Telecomputer rejected the math coprocessors because they were remarked products. Telecomputer showed Terabyte how to detect the original markings on the math coprocessors. After receiving remarked math coprocessors from Microstar on more than one occasion, Terabyte allegedly complained to Microstar. Microstar referred Terabyte to its supplier, Fred Worthy, and Terabyte began buying math coprocessors from Worthy after obtaining reassurances from Worthy and a person whom Worthy called on his speaker phone, who was said to be from Intel, that Worthy was an authorized Intel distributor. As it turns out, Worthy bought only 287-6 math coprocessors from Intel and sold remarked 287-10 math coprocessors to Terabyte.

JURISDICTION AND STANDARD OF REVIEW

A. General

Intel brought this action under the Lanham Act and California state law. The district court had jurisdiction over the Lanham Act claims pursuant to 15 U.S.C. Sec. 1121, and we have jurisdiction over the final judgment under 28 U.S.C. Sec. 1291.

"In reviewing the factual findings of the District Court, the Court of Appeals [is] bound by the 'clearly erroneous' standard of Rule 52(a), Federal Rules of Civil Procedure." Inwood Lab., Inc. v. Ives Lab., Inc., 456 U.S. 844, 855, 102 S.Ct. 2182, 2189, 72 L.Ed.2d 606 (1982). "An appellate court cannot substitute its interpretation of the evidence for that of the trial court simply because the reviewing court might give the facts another construction, [and] resolve the ambiguities differently...." Id. at 857, 102 S.Ct. at 2190 (quotation omitted).

B. Attorney's Fee Award

Intel argues that we lack jurisdiction to review both the district court's decision to award Intel's attorney's fees and the amount of the award because Terabyte did not appeal from the district court's order determining the amount of fees. Terabyte answers that we have jurisdiction because the opening brief was filed within 30 days of the final order setting the amount of attorney's fees and that document served as an adequate notice of appeal.

"A 'final decision' generally is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Budinich v. Becton Dickinson & Co., 486 U.S. 196, 199, 108 S.Ct. 1717, 1720, 100 L.Ed.2d 178 (1988) (quotation omitted). "[A] claim for attorney's fees is not part of the merits of the action to which the fees pertain." Id. at 200, 108 S.Ct. at 1721. Thus, "an unresolved issue of attorney's fees for the litigation in question does not prevent judgment on the merits from being final." Id. at 202, 108 S.Ct. at 1722; see International Ass'n of Bridge, Structural, Ornamental, & Reinforcing Ironworkers' Local Union 75 v. Madison Indus., Inc., 733 F.2d 656, 659 (9th Cir.1984).

Because the issue of attorney's fees and determination of the merits are collateral to one another, it follows logically that an award of attorney's fees does not become final and appealable until the amount of the fee award is determined. Therefore, Terabyte's notice of appeal, timely filed after the district court's corrected judgment but before the determination of the fee amount, pertained only to the merits of the litigation. Cf. Budinich, 486 U.S. at 202, 108 S.Ct. at 1722. The question remaining is whether Terabyte's opening brief satisfies the requirements for a notice of appeal as to the attorney's fee determination.

Federal Rule of Appellate Procedure 3(a) provides that "[a]n appeal ... from a district court to a court of appeals shall be taken by filing a notice of appeal ... within the time allowed by Rule 4." Although the time of appealability is jurisdictional and Here, the district court filed its order setting the amount of attorney's fees on June 9, 1992 and Terabyte filed its opening brief on June 18, 1992, well within the time limit for filing a notice of appeal pertaining to the fee award. See Fed.R.App.P. 4(a). Terabyte's opening brief satisfied the requirements of Rule 3 by specifying the parties to the appeal, designating the judgment appealed from and naming this court. See Allah v. Superior Court of California, 871 F.2d 887, 889-90 (9th Cir.1989) (appellant's opening brief served as notice of appeal). Thus, Terabyte's opening brief serves as the notice of appeal required by Rule 3, see Smith, --- U.S. at ----, 112 S.Ct. at 682, and we have jurisdiction over Terabyte's challenge to the attorney's fee award.

strictly applied, see Budinich, 486 U.S. at 203, 108 S.Ct. at 1722, the requirements of Rule 3 are construed liberally. Smith v. Barry, --- U.S. ----, ----, 112 S.Ct. 678, 681, 116 L.Ed.2d 678 (1992). "[W]hen papers are 'technically at variance with the letter of [Rule 3], a court may nonetheless find that the litigant has complied with the rule if the litigant's action is the functional equivalent of what the rule requires.' " Id. at ----, 112 S.Ct. at 681-82 (quotation omitted). Rule 3 requires that the paper specify the party or parties taking the appeal, the judgment appealed from, and the court to which the appeal is taken. Fed.R.App.P. 3(c). The paper must "specifically indicate the litigant's intent to seek appellate review, the purpose of this requirement is to ensure that the filing provides sufficient notice to other parties and the courts." Id. at ----, 112 S.Ct. at 682 (citation omitted); see Ortberg v. Moody, 961 F.2d 135, 137 (9th Cir.) (liberal construction of Rule 3 applicable to parties proceeding through counsel), cert. denied, --- U.S. ----, 113 S.Ct. 225, 121 L.Ed.2d 162 (1992).

DISCUSSION

A. Trademark Infringement

"The Lanham Act was intended to make 'actionable the deceptive and misleading use of marks' and 'to protect persons engaged in ... commerce against unfair competition.' " Two Pesos, Inc. v. Taco Cabana, Inc., --- U.S. ----, ----, 112 S.Ct. 2753, 2757, 120 L.Ed.2d 615 (1992) (footnote omitted) (quoting 15 U.S.C. Sec. 1127). Under 15 U.S.C. Sec. 1114(1),

Any person who shall, without the consent of the registrant--

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a...